Presentation on Seamless flow of credit under GST

1. 2021
Seamless Flow
of
Credit
under GST
(Indirect Tax)
Classroom Deliberations
CA Dr Prithvi Ranjan Parhi
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2. Understanding CGST, SGST, UTGST & IGST
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© CA Dr Prithvi Ranjan Parhi
Foreign
Territory State 1
State 2
Union Territory
IGST
IGST
IGST
IGST
CGST +SGST
CGST +SGST
CGST +UTGST

3. ITC Utilisation
Input Tax Credit Tax Liability
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IGST
CGST
SGST
IGST
CGST
SGST

4. Input Tax Credit
CGST
IGST
First to pay CGST
Second to pay
IGST
Not allowed to
SGST
First to pay SGST
Second to pay
IGST
Not allowed to
CGST
First to pay IGST
Second to pay
CGST
Third to pay SGST
SGST
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© CA Dr Prithvi Ranjan Parhi
To be utilised
First
Only after
exhausting
CGST ITC

5. Seamless flow of credit
Since GST is a
destination based
consumption tax, revenue
of SGST ordinarily
accrues to the consuming
States.
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IGST
CGST
SGST IGST
IGST
CGST
SGST
The inter-State supplier in the exporting State is allowed to set off
the available credit of IGST, CGST and SGST/UTGST (in that order)
against the IGST payable on inter-State supply made by him.
The buyer in the importing State is allowed to avail the credit of
IGST paid on inter-State purchases made by him.
Under GST regime there is a seamless credit flow in case of inter-
State supplies too.
Interstate Supply
Interstate/
Intrastate Supply

6. Seamless flow of credit
The revenue of inter-State sale
does not accrue to the exporting
State.
The exporting State transfers to
the Centre the credit of
SGST/UTGST used in payment of
IGST.
The Centre transfers to the
importing State the credit of IGST
used in payment of SGST/UTGST.
Credit chain does not break.
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SGST/
UTGST
used in
payment
of IGST
IGST
used in
payment
of SGST/
UTGST
Centre
This ensures seamless flow of credit under GST, in
case of intra-State and inter-State supplies .

7. I. Illustration :Intra-State Supply
• In case of local supply of goods/ services, the supplier would charge dual GST
i.e., CGST and SGST at specified rates on the supply.
I. Supply of goods/ services by A to B
The CGST & SGST charged on B for supply of goods/services will be remitted by
A to the appropriate account of the Central and State Government respectively.
A is the first stage supplier of goods/services and hence, does not have credit of
CGST, SGST or IGST.
©CA.Dr.Prithvi Ranjan Parhi
Amount (in Rs.)
Value charged for supply of goods/ services 10,000
Add: CGST @ 9% 900
Add: SGST @ 9% 900
Total price charged by A from B for local supply of
goods/ services
11,800

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9. II. Supply of goods/services by B to C –
Value addition @ 20%
• B will avail credit of CGST and SGST paid by him on the purchase
of goods/ services and will utilize such credit for being set off
against the CGST and SGST payable on the supply of
goods/services made by him to C.
©CA.Dr.Prithvi Ranjan Parhi
Amount (in Rs.)
Value charged for supply of goods/ services
(Rs. 10,000 x 120%)
12,000
Add: CGST @ 9% 1,080
Add: SGST @ 9% 1,080
Total price charged by B from C for local supply of
goods/ services
14,160

10. Computation of CGST, SGST payable by B to Govt
Note: Rates of CGST and SGST have been assumed to be 9% each for the
sake of simplicity.
©CA.Dr.Prithvi Ranjan Parhi
Amount (in Rs.)
CGST payable 1,080
Less: Credit of CGST 900
CGST payable to Central Government 180
SGST payable 1,080
Less: Credit of SGST 900
SGST payable to State Government 180

11. Statement of revenue earned by Central and State Govt
©CA.Dr.Prithvi Ranjan Parhi
Transaction Revenue to Central
Government (Rs.)
Revenue to State
Government (Rs.)
Supply of
goods/services
by A to B
900 900
Supply of
goods/services
by B to C
180 180
Total 1,080 1,080

12. 2. Illustration :Inter-State Supply
• In case of inter-State supply of goods/ services, the supplier
would charge IGST at specified rates on the supply.
I. Supply of goods/services by X of State Odisha to A of State
Odisha
X is the first stage supplier of goods/services and hence, does
not have any credit of CGST, SGST or IGST.
©CA.Dr.Prithvi Ranjan Parhi
Amount (in Rs.)
Value charged for supply of goods/services 10,000
Add: CGST @ 9% 900
Add: SGST @ 9% 900
Total price charged by X from A for intra- State
supply of goods/services
11,800

13. II. Supply of goods/services by
A of State Odisha to B of State AP
– Value addition @ 20%
©CA.Dr.Prithvi Ranjan Parhi
Amount
(in Rs.)
Value charged for supply of goods/services
(Rs. 10,000 x 120%)
12,000
Add: IGST @ 18% 2,160
Total price charged by A from B for inter-
State supply of goods/services
14,160

14. Computation of IGST payable to Government
• The IGST charged on B of State AP for supply of goods/services
will be remitted by A of State Odisha to the appropriate account
of the Central Government.
• State Odisha (Exporting State) will transfer SGST credit of Rs. 900
utilised in the payment of IGST to the Central Government.
©CA.Dr.Prithvi Ranjan Parhi
Amount (in Rs.)
IGST payable 2,160
Less: Credit of CGST 900
Less: Credit of SGST 900
IGST payable to Central Government 360

15. III. Supply of goods/services by B of State AP to C of
State AP – Value addition @ 20%
• B will avail credit of IGST paid by him on the purchase of
goods/services and will utilize such credit for being set off against
the CGST and SGST payable on the local supply of goods/services
made by him to C.
©CA.Dr.Prithvi Ranjan Parhi
Amount
(in Rs.)
Value charged for supply of goods/
services (Rs.12,000 x 120%)
14,400
Add: CGST @ 9% 1,296
Add: SGST @ 9% 1,296
Total price charged by B from C for local
supply of goods/services
16,992

16. Computation of CGST, SGST payable to Government
• Central Government will transfer IGST credit of Rs. 864 utilised in
the payment of SGST to State AP (Importing State).
Note: Rates of CGST, SGST and IGST have been assumed to be
9%, 9% and 18% respectively for the sake of simplicity.
©CA.Dr.Prithvi Ranjan Parhi
Amount (in Rs.)
CGST payable 1,296
Less: Credit of IGST 1,296
CGST payable to Central Government Nil
SGST payable 1,296
Less: Credit of IGST
(Rs.2,160 – Rs.1,296)
864
SGST payable to State Government 432

17. Statement of revenue earned
by Central and State Governments
©CA.Dr.Prithvi Ranjan Parhi
Transaction Revenue to
Central
Government
(Rs.)
Revenue to
Government
of State
Odisha (Rs.)
Revenue to
Government
of State AP
(Rs.)
Supply of
goods/services by X to A
900 900
Supply of
goods/services by A of Odisha to B
of AP
360
Transfer by State Odisha to Centre 900 (900)
Supply of
goods/services by B to C
432
Transfer by Centre to State AP (864) 864
Total 1,296 Nil 1,296

18. Registration
– Every supplier of goods and/or services is required to obtain
registration in the State/UT from where he makes the taxable
supply if his aggregate turnover exceeds the threshold limit
during a FY.
**persons engaged exclusively in intra-State supply of goods
©CA.Dr.Prithvi Ranjan Parhi
States with
threshold limit of
Rs.10 lakh for both
goods and services
States with
threshold limit of
Rs.20 lakh for both
goods and services
States with
threshold limit of
Rs.20 lakh for
services and Rs.40
lakh for goods**
•Manipur
•Mizoram
•Nagaland
•Tripura
•Arunachal Pradesh
•Meghalaya
•Sikkim
•Uttarakhand
•Puducherry
•Telangana
•Jammu and
Kashmir
•Assam
•Himachal Pradesh
•All other state

19. UIN
• Unique Identification Number, UIN, is a special class of GST
registration for foreign diplomatic missions and
embassies which are not liable to taxes in the Indian territory.
• Any amount of tax (direct or indirect) collected from such
bodies is refunded back to them.
Who can apply for UIN under GST?
1. A specialized agency of the United Nations Organization
2. A Multilateral Financial Institution and Organization notified
under the United Nations (Privileges and Immunities) Act,
1947,
3. Consulate or Embassy of foreign countries
4. Any other person or class of persons as notified by the
Commissioner
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20. Alcoholic liquor for human
consumption:
GST is levied on all goods and services, except
– alcoholic liquor for human consumption and
– petroleum crude, diesel, petrol, ATF and natural gas.
Alcoholic liquor for human consumption: is outside
the realm of GST.
The manufacture/production of alcoholic liquor
continues to be subjected to State excise duty and
inter-State/intra-State sale of the same is subject to
CST/VAT respectively.
©CA.Dr.Prithvi Ranjan Parhi

21. Petroleum crude, diesel, petrol, ATF and natural gas:
As regards petroleum crude, diesel, petrol, ATF and natural
gas are concerned, they are not presently leviable to GST.
GST will be levied on these products from a date to be
notified on the recommendations of the GST Council.
Till such date, central excise duty continues to be levied on
manufacture/production of petroleum crude, diesel, petrol,
ATF and natural gas and inter-State/intra-State sale of the
same is subject to CST/ VAT respectively.
©CA.Dr.Prithvi Ranjan Parhi
Petroleu
m
crude
High
speed
diesel
Motor
spirit(co
mmonly
known as
petrol)
Natural
gas
Aviation
Turbine
fuel

22. Tobacco:
Tobacco is within the purview of GST, i.e. GST is
leviable on tobacco.
Union Government has also retained the power
to levy excise duties on tobacco and tobacco
products manufactured in India.
Resultantly, tobacco is subject to GST as well as
central excise duty.
©CA.Dr.Prithvi Ranjan Parhi

23. Real estate sector
• GST is not applicable on ready-to-move (RTM) properties for which
completion certificates are issued.
• Because Sale of building is treated as activity or transaction which shall
be treated neither as a supply of good nor a supply of service as per
SCHEDULE III of CGST Act,2017
• GST is also not applicable on resale of properties, on Land purchase
and sale.
• GST applies to residential apartments in Real Estate Project (REP) and
Residential Real Estate Project (RREP) and commercial apartments in
RREP which are covered under RERA [Real Estate (Regulation and
Development) Act, 2016].
• However GST is applicable on supply of Under Construction
Properties , works contracts etc.
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24. PAN
Alphabet ‘Z’
by default
Check digit
State Code
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25. Exemption from tax : Sec 11 (1)
(1)Where the Government is satisfied that it is
necessary in the public interest so to do, it may,
on the recommendations of the Council, by
notification, exempt generally,
– either absolutely or
– subject to such conditions as may be specified
therein,
• goods or services or both of any specified
description from the whole or any part of the tax
leviable thereon with effect from such date as
may be specified in such notification.
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26. GST Common Portal
• Managed by GSTN which is a Section 8
Company.
• Accessible over internet
• Services provided
– Registration
– Payment & Refund
– Return
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28. E- waybill Portal
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29. www.ewaybillgst.gov.in
• However, it is important to note that the
Common GST Electronic Portal for furnishing
electronic way bill is www.ewaybillgst.gov.in .
• Managed by the National Informatics Centre,
Ministry of Electronics & Information
Technology, Government of India.
• E-way bill is an electronic document generated
on the GST portal evidencing movement of
goods.
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31. e-Way Bill
• e-Way Bill is mandatory for Inter-State movement of
goods of consignment value exceeding Rs.50,000/- in
motorized conveyance.
• Registered GST Taxpayers can register in the e-Way Bill
Portal using GSTIN.
• Unregistered Persons/ Transporters can enroll in the e-
Way Bill System by providing their PAN and Aadhaar.
• Supplier/ Recipient/ Transporter can generate the e-Way
Bill.
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33. Goods
• In terms of Section 2 (52) of the CGST
Act “Goods” means every kind of
movable property other than money and
securities
• but includes actionable claims, growing
crops, grass and other things attached to
or forming part of land which are agreed
to be severed before supply or under a
contract of supply.
• Article 366(12) in The Constitution
Of India
• Goods includes all materials,
commodities, and articles;
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34. Services
• In terms of Section 2(102) of the CGST
Act “Services” means anything other
than goods, money and securities but
• includes activity relating to the use of
money or its conversion by cash or by
any other mode, from one form, currency
or denomination, to another form,
currency or denomination for which a
separate consideration is charged.
• Article 366(26A):
• Services means anything other than
goods.
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35. All Supply
• Thus, all supply of goods or services or both would
attract CGST (to be levied by Centre) and SGST (to be
levied by State) unless kept out of the purview of GST.
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36. Supply
• There is no requirement of actual sale of goods under
GST.
• The alternative methods of supply of goods could be
in the form of:
• stock transfer;
• captive consumption in another location;
• supply on consignment basis or any other basis by the
principal to his agent;
• supply on job work basis (if working under returnable basis-
no tax need be paid);
• any other supply such as donation, sample etc.
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37. GSTC
• (2) The Goods and Services Tax Council (GSTC) shall
consist of the following members, namely:—
– (a) Chairperson- Union Finance Minister;
– (b) Member From Central Govt- Union Minister of State in
charge of Revenue or Finance;
– (c) Members from State Govt – Minister in charge of Finance
or Taxation or any other Minister nominated by each State
Government.
• (3) The Members of the Goods and Services Tax Council
(GSTC) referred to in sub-clause (c) of clause (2) shall, as
soon as may be, choose one amongst themselves to be
the Vice-Chairperson of the Council for such period as
they may decide. (ie Vice Chairperson will be from
Member from State Govt)
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38. GSTC
• (4) The Goods and Services Tax Council (GSTC) shall make
Recommendations to the Union and the States on—
– (a) the taxes, cesses and surcharges levied by the Union, the States and
the local bodies which may be subsumed in the goods and services tax;
– (b) the goods and services that may be subjected to, or exempted from
the goods and services tax;
– (c) model Goods and Services Tax Laws, principles of levy, apportionment
of Integrated Goods and Services Tax and the principles that govern the
place of supply;
– (d) the threshold limit of turnover below which goods and services may be
exempted from goods and services tax;
– (e) the rates including floor rates with bands of goods and services tax;
– (f) any special rate or rates for a specified period, to raise additional
resources during any natural calamity or disaster;
– (g) Special provision with respect to the States of Arunachal Pradesh,
Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland,
Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and
– (h) any other matter relating to the goods and services tax, as the Council
may decide.
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© CA Dr Prithvi Ranjan Parhi

39. GSTC
• (5) The Goods and Services Tax Council (GSTC)
shall recommend the date on which the goods
and services tax be levied on petroleum crude,
high speed diesel, motor spirit (commonly
known as petrol), natural gas and aviation
turbine fuel.
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© CA Dr Prithvi Ranjan Parhi

40. Thank you
prithvi.baps@gmail.com
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